ANNUAL BUSINESS/OPERATING PLAN

This is a very important business exercise which is driven both Bottoms Up and Top Down.

The first cut exercise is done Bottoms up where each business division , location is asked to provide their budget for the year.

The idea is to understand their expectation about the growth in revenues that the local managers expect and the increase in costs basis the contractual obligations and the local inflation etc.

Once the same is send by all the locations it is rolled up at the HO to arrive at the overall Budget .

The same is then benchmarked against the economic and the industry benchmark and also the premium that the company enjoys in it's market capitalization because of it's over the economy or industry performance , or otherwise taking that target to improve the market sentiment and therefore the value of the shareholders of the company.

If the same is not in line with the bottoms up the revised guidelines are sent to the regional heads and they depending upon the locations potential allocate the same .

It is important to note that the entire bonus payouts and increments for the next year ( partially ) depends upon the actual achievement against the results and therefore it is treated as the most important guidance numbers to follow .

The preparation of the same starts with

a) Monthly Sales Volume

b) Mix of the Product / Services

c) Rates at which the sales is expected

d ) Cost of Sales

e) Gross Margin

f) Fixed Overheads

g) EBIDTA ( %)

h) Interest

I) PBDT

j) Depreciation

k) PBT


Also Productivity Analysis for Operations Department and their KPIs is reviewed

For Sales team Sales Performance is reviewed in terms of

a) Actual Sales against Target

b) New Customers Sales Vs New Customer Target Sales

c) Sale Price ( net of discount ) vs Budgeted Sale Price ( in case there is a market price down or up due to external factors the same needs to be adjusted )

d ) Pipeline Analysis

e) Conversion Ratio ( Prospecting to Meeting to Selling Ration )

Manpower Planning

a )Total Headcount

divided into

Department wise

Rank Wise

b)Total Cost Rank Wise/ Department and Consolidated

c) Ratio of Various Ranks in quantity and value terms

d)Salary of Top Management and Junior Management Ratio etc.

CAPITAL BUDGET

List of Capital Items to be Procured with Value and their ROI wherever possible

Cost Saving Initiatives

Revenue Maximization Initiatives

Customer Satisfaction improvement initiatives

Employee Satisfaction improvement Initiatives

CSR Budgets

Any other special initiatives

In case of Start-up it can be one exercise for the initial few years post which